Show Me the Money You don't need big bucks to start a franchise, just the right kind of funding. How three others did it and tips for you.

It takes a substantial amount of money to buy a franchise, notto mention cover the costs of supplies, overhead and, in somecases, building a location. Understandably, many franchisees findthat kind of capital tough to secure. But rest assured: Ifyou're considering buying a franchise, money doesn't haveto be an object. Throw away any preconceived notions about needingto be born rich or have $1 million in savings to get intofranchising--these franchisees are living proof that a dream,perseverance and financing options can create a perfect recipe forfranchise ownership.

All Wrapped Up

When Stan Harris tried to purchase his Charlotte, NorthCarolina, Great Wraps, he had no luck securing a loan fromfinancial institutions to fund his wrapped-sandwich restaurant.Even the bank where he worked as a mutual funds salesrepresentative rejected his loan application. No banks providedHarris a formal reason for not approving the loan, other than theywere unable to fund such a project.

His frustration mounted. "I put a lot of time and effortinto creating my business plan and trying to make thishappen," says Harris, 44. Rather than give up, he forgedahead, fired up by his belief that the wrap concept would explodein popularity in the near future.

"It's been my lifelong dream to own and operate my ownbusiness," says Harris. Growing up in Detroit, "mostpeople thought once you graduated from high school, your onlyalternative was to work for GM or the other big carmanufacturers," he recalls. "My father wanted me to avoidthat path." Consequently, when it came to pursuing hisfranchisee dreams, even in the face of financial hurdles, Harrissays he "was very persistent."

In all the time he spent pounding the pavement from one bank toanother, Harris never stopped to consider the financial riskinvolved in making the move from employee to franchisee."Honestly, I only thought about opening up my Great Wraps andbeing successful," says Harris. He hoped his change of careercould also provide his children with future opportunities.

Harris' luck turned around the very day he was turned downby the last bank he applied at. He had heard about communitydevelopment lender Self-Help Credit Union and called them upimmediately. With a mission to create ownership and economicopportunities for women, minorities, rural residents and low-incomefamilies, Self-Help asked Harris to tell them the actual costs ofthe franchise and location. After Harris came up with anumber--$200,000--the SBA underwrote a loan through Self-Help tofinance him as long as he came up with 20 percent of the sum, whichhe gathered from his savings and 401(k).

Harris' experience taught him that loan approval requiresseveral components: an excellent business plan, good credit and theability to contribute a portion of the financing. "I'velearned that everyone wants to know what you're willing to puton the table before they're willing to make acontribution," says Harris. He also received some sage advicefrom his wife: "To have people believe in your dream, you haveto believe in yourself." He's glad he went the extra mileto make that dream a reality.

Smoothie Sailing

Lei Kaniaupio and Dmitri Spadaccini knew they were facing someheavy competition with their Robeks franchise in Honolulu, but thehusband-and-wife team believed in the concept. A businessdevelopment employee turned stay-at-home mom, Kaniaupio loved thatthe smoothie franchise was a lifestyle brand promoting healthyeating and living. "Hawaii's market is so perfect for thisproduct," says Kaniaupio, a vegetarian. "It's notjust smoothies-it's sandwiches, soups, muffins, etc. Our wholeconcept is based on this healthy attitude." Kaniaupio andSpadaccini, a former general manager facilitator, decided theywanted to be franchisees and regional directors for thefranchise in Hawaii, which essentially meant they needed not one,but two loans.

While Robeks offered a few financing options, Kaniaupio, 42, andSpadaccini, 40, quickly found out those options wouldn't workbecause the couple was thousands of miles away from the contiguousUnited States. Initially, their island paradise home appeared towork against them-that is, until Bank of Hawaii, which is widelyknown to be one of the most conservative banks there, granted thecouple a loan. Says Kaniaupio, "The fact they actually fundedus was quite a feat."

When starting the financing process with Bank of Hawaii,Kaniaupio found herself in a Catch-22. "The bank wants you tohave a location set and all your facts and figures based on thatlocation. The landowners or managers want to know you have yourfinancing, so it's a tricky balance." She was able to getboth sides to work with each other and is now in negotiations withsome Hawaiian property managers to eliminate this hurdle for futureRobeks franchisees.

Another problem came with the large loan amount. Initiallyseeking 100 percent financing, "I realized it would take myfirstborn as collateral," jokes Kaniaupio. "There's abig difference between partial and full financing." Thecouple instead received $135,000 in financing through Bank ofHawaii. The rest came from savings and family members.

As far as funding for the regional directorship, Kaniaupioturned to a government agency, the Office of Hawaiian Affairs,wanting to keep her franchise loan separate. "OHA is very intohelping Hawaiian entrepreneurs," says Kaniaupio. She took arequired eight-week course before getting approval for a loan setat 2 percent for five years, with the first six months beinginterest-only. OHA funded the maximum of $75,000; Kaniaupio andSpadaccini came up with the rest from savings and family.

With all the financing obstacles they've overcome, Kaniaupioand Spadaccini believe they've truly blazed the trail for anyfuture Robeks franchisees in the state. "We're opening theway for people coming on," says Kaniaupio. "They'llsee how an existing business is doing and will have something tocompare [their businesses] to."

Heavy Metal

Before getting laid off in 2000, Henry Niedzwecki had spent mostof his career selling different types of equipment in the weldedsteel industry. After studying the job climate and evaluating othersales positions, Niedzwecki, 56, deduced, "I was not the rightguy at the right time." He decided he would instead purchase amachinery-related business or franchise and stay within his comfortzone. He happened upon metal retail franchise Metal Supermarketswhile searching online, and he set up a meeting with thefranchisor. "They were the kind of people I've been doingbusiness with the past 20 years," he says. "It was animmediate fit."

Using money from an inheritance, Niedzwecki's wife, Susan,covered the $35,000 Metal Supermarkets license fee. When it came tototal startup costs, however, the franchisor estimated it wouldtake about $250,000. The couple used savings and an IRA account tocontribute about $90,000. Niedzwecki's brother-in-law hadencouraged him to look into running a business and was willing toinvest. With two other minor investors-his sister-in-law and hiswife's aunt-they came up with an additional $60,000.

Niedzwecki got the remaining startup funds from a bank loan.Seeking $100,000, he found the regional and statewide banksweren't interested in such a small amount. While his communitybank was smaller, Niedzwecki found their enthusiasm to work withhim a draw. "My perception going into this was not that I wasbegging for money-it was, 'I'm starting a business, andI'm looking for a banking partner.'"

Niedzwecki took his attorney's advice and created an LLC topurchase the franchise, which opened in Nashville in 2002. "Westructured an agreement whereby I was to buy a specified proportionof everyone's shares over a three-year cycle beginning thisyear," he explains. "Going into business with family isfraught with all sorts of perils. Have a strong but flexibleagreement. It's not just a good idea-it's anecessity." Niedzwecki gladly reports his has stayed one happyfamily.

Having Fund Yet?

Frank Roth, senior vice president of global marketing forGECommercial Finance, Franchise Finance, offers the followingtips on finding franchise funding:

• Find out whether your franchisor provides resources to helpyou with financing. "Lean on the franchisor as much aspossible," says Roth. "They know the unique situations,they'll potentially know the geography you're going to openin, and they have relationships with banks or financecompanies."

• Visit your local bank. Roth points out that they may bemore willing to lend to you based on your individual merits ratherthan evaluating the industry or strength of the brand. "Useone you have ongoing relationships with, and leverage that one wayor another." Roth adds that any relationship with a financingentity, whether it's through a car loan, home mortgage orbanking account, is a potential resource.

• Check out franchise finance lenders. Whereas banks andfinancial institutions typically "look at it as investing inthe individual," says Roth, a franchise finance lender"is already familiar with the industry segment and the brandand would focus on that." He points out that franchise financelenders might take on someone with less equity and more experienceif they're comfortable with the brand.

For more information on financing your franchise, go to www.entrepreneur.com/franchisezone/funding.